Sunak
© Simon Walker/HM Treasury
Rishi Sunak was criticised for not wearing a face masks during a publicity trip to Wagamamas.
As news rolls in each day of a fresh round of job losses, fatalism seems to have set in. Forecasts suggest that as many as 1.3m jobs could be lost as the government's furlough scheme ends; and unemployment could hit a terrible new high of 4 million people by the end of the year. However, all sides of the political debate seem to have conceded that the flagship job retention scheme will have to end soon for most businesses.

But if we look abroad at countries like Germany, France and Switzerland, mass unemployment and job destruction on such a scale is not seen as a price worth paying in a recession. Instead, state-subsidised "short-time working" schemes kick in across the economy, so that firms cut fewer jobs and employ more people, even if some are on shorter hours. This means that workers can hold on to their job on reduced hours, and companies avoid the costly process of firing and re-hiring. This is in stark contrast to the UK's all-or-nothing job shedding.

During the 2008 financial crisis Germany was the only G7 country that did not experience a fall in employment - largely down to its Kurzarbeit or short-time working scheme. The UK's job retention scheme is a version of this, but it is being wound down here just five months after its introduction, whereas in France, Germany and Finland the schemes will be in place until next spring. And while a cut in income is tough for those on the lowest wages, they are frequently topped up by employers. In France the scheme has a floor to prevent people slipping below the minimum wage.

The benefit of keeping people in work goes beyond just protecting incomes. Work has been a coping mechanism for many in this crisis, as ONS data shows. Helping more people to stay in work by extending the new "flexible" furlough scheme here could have a hugely positive impact on people's mental health, with even one day of work a week found to make a genuine contribution to wellbeing.


Comment: What a dire state the country is in - it's not as though the UK doesn't have work that needs doing.


Distributing work more evenly across the workforce could also help to arrest the disastrous backwards slide in gender equality since the Covid-19 crisis began, particularly for women with caring responsibilities. Of parents who were in paid work prior to the lockdown, mothers are one and a half times more likely than fathers to have permanently lost their job or quit since lockdown began. Greater availability of flexible, part-time work could help more women stay in work - especially while a rescue package for the childcare sector is not on the horizon.

Instead of this, what we are likely to see is a disproportionately male, white and educated group working ever longer hours while others leave the workforce altogether, possibly forever.

Yes, extending the scheme would be expensive, but so are the costs of long-term unemployment: in 2016, we were still spending an estimated £20bn a year on the failure to deal with long-term unemployment in the 1980s. And the other options the chancellor may ultimately have to turn to, such as reducing employer National Insurance contributions, are not cheap either. The jobs retention bonus that Rishi Sunak has already introduced effectively extends the scheme for a month in terms of cost, but but at just £1,000 per worker it risks having limited impact, particularly for those on higher incomes.

Sunak is banking heavily on a "V-shaped" recovery and hoping we don't face a second wave of the pandemic or ongoing impacts such as frequent local lockdowns of towns or factories. He is also relying on enough new jobs being created to offset those lost elsewhere in the economy.


Comment: Sunak is deadly wrong on both accounts; there is no recovery of any shape on the horizon and despite there being no first wave of a pandemic, never mind a second one, those running the UK are using increased testing as justification to enforce regional lockdowns.


But there are huge risks with this bet. Right now, the number of job vacancies has collapsed to its lowest level since data was first collected 20 years ago, and there are few signs of this picking up. The course of the pandemic is highly unpredictable, but it seems likely there will be more local outbreaks. Businesses in Leicester were able to re-furlough staff who had already participated in the scheme, but what happens after October? Others can be expected to demand the same treatment if their area is affected. And while new jobs can be created in green industries and health and social care, we would need at least eight times the £5bn committed by the chancellor over two years to get close to the number of jobs that would be needed to fill the gap.

It is becoming clearer by the day that the winding down of the furlough scheme this autumn will be a catastrophic mistake if no additional action is taken.

So far no clear alternative has come from the left either. Labour has called for targeted support for the hardest hit sectors, but the effects of this crisis are too unpredictable and far-reaching for this to be the limits of its ambition.

Alongside some continuation of the flexible furlough scheme, perhaps the best response to a period of high unemployment with little job creation would be to massively invest in the universal credit system so that it can act as the "automatic stabiliser" it is supposed to be. This would maintain incomes where hours have been reduced and keep afloat those who are out of work altogether. But the case for a properly effective system of social insurance, including decent support for the self-employed, is waiting to be made.

The political classes appear gripped by defeatism on mass redundancies, despite the painful experiences of the 1980s. We urgently need progressive ideas that can meet the scale of the challenge ahead. In the months ahead, "cut hours not people" should be our mantra for this unemployment crisis.